Mercury NZ Limited (MCY.AX) Earnings Call Transcript & Summary

[Foreign Language] To all our shareholders and guests, in person and online, it's an absolute pleasure to welcome you to Mercury's Annual Shareholders' Meeting for 2025. So I'm Howard Thomas. I'm Mercury's Company Secretary. I would like to begin the meeting today with a karakia and I'm going to invite Stew Hamilton, Chief Executive to lead Stew.

[Foreign Language] Firstly, I'd just like to acknowledge [Foreign Language] and I'll start off with a katakia. [Foreign Language]

So I'll quickly run through some housekeeping before we get started. So this is a nonsmoking venue. So if you'd like to smoke, please exit the building and go to the car park. Toilets are located in the foyer area pass the Computershare desk where you came in earlier on this afternoon. Now if there's an emergency, please follow the instructions of Eden Park and security staff. So your nearest safe exit is back down the entry stairs where you came in, that's Gate G. If Gate G is unavailable, then Gate F, which is to my right here. down at the eastern end there. Please continue across the car park to the assembly point, which is on Remus Avenue. If you have mobility issues, please seek assistance from the Eden Park staff. Now following today's meeting, I'm really hopeful you'll join our directors, management and the rest of the wonderful Mercury team for tea, coffee and biscuits, which will be in this room here. Now for those of you here in person, feedback forms were placed on your seats. We do like that feedback. So please let us know what you think then either place the form in the box near the exit on your way out or just pass it to one of the wonderful Mercury employees. For those of you online, a survey link will appear underneath the broadcast box near the end of the meeting. Now for some quick procedural matters. For those of you here in person today, we have roving microphones. If you wish to ask a question during Q&A, please just raise your hand and we'll bring you the microphone. I would really appreciate it if you could state your name and whether you are a shareholder or a proxy holder when you ask a question. Thanks for that. Now after each resolution is presented, we're going to pause for questions on that resolution, and that resolution only, and then we'll have time for general questions about the business and Mercury's business towards the end of the meeting at the appropriate time. Now we've got representatives from our customer service team here today in person. So if you've got any questions in your capacity as a customer, and I hope that you all are, then please speak to them after the meeting, better that than asking the questions during the course of the meeting. So you cannot miss the team. They're in yellow Mercury T-shirts and they're also set up at the table by the doors where you came in today. So for those of you online with a question during the meeting, please use the Q&A tab. That's on the right-hand side of your screen there, you see the yellow arrow to submit your question. Now if you need help, you can type your query, and one of the good folks from Computershare will help you using the chat function on the platform there. Alternatively, you can call Computershare on 800-650034. Now we have a moderator, Paul, who will do his best to represent all of those questions asked online. Example going to change those questions unless we need to correct any obvious typos. However, if there are several questions of the same sort of type then he may group those together to put them into 1 representative question. Now we encourage you to submit questions throughout the meeting. However, these will not be addressed until the applicable Q&A section during the meeting. So we do ask that those questions be kept relevant to the proceedings today, and they are succinct and clear. Now turning to voting. The Chair will shortly open online voting for today's resolutions. It's going to provide enough time for online attendees to vote. So if you're eligible to vote, you'll be able to vote cast your vote using the vote tab -- and your vote will actually been cast when the tick peers, some quite self-explanatory. You can change your vote at any time until we declare voting closed by selecting change your vote on the platform. Now today, we have 4 resolutions. Resolution 1 is the reelection of Susan Peterson as a Director. Resolution 2 is the reelection of Scott St. John as a director. Resolution 3 is the election of Rob Hamilton as a Director. And Resolution 4 is the election of Rachel Taulelei as a director. So the Chair will let you know before he moves to close the voting. Voting instructions for shareholders and proxies here today in person will be provided when we get to that part of the meeting. So it now leads me to invite your chair, Scott St. John, to open 2025 Annual Shareholders Meeting. Scott?

Thank you, Howard. Well, good afternoon, and thank you for joining us at Mercury's 2025 Annual Shareholders' Meeting. As Howard said, my name is Scott St. John, and I'm the Chair of Mercury NZ Limited. And on behalf of your directors, our Chief Executive, Stew Hamilton, our leadership team and all of Mercury, I extend to you a warm welcome. So I'm pleased to confirm that we have a quorum represented here today and therefore, declare Mercury's 2025 Annual Shareholders' Meeting open. Voting is open on all items of business. So outlining our agenda today. First, I will introduce you to our Board to your Board I will then comment briefly on our financials and the broader environment in which we're operating in. Stew will then talk to Mercury's forward focus and following Stew's address, we will hear from our Executive General Manager, wholesale, Tim Thompson; and Chief Financial Officer, Richard Hopkins, about key activities in their areas. We will then move to resolutions. After the resolutions are presented and voting is closed, you will have the opportunity to ask general questions relating to the company. So now for the introductions. We have starting on my right, at the far end, James Miller, who chairs our Audit and Financial Risk Committee and also retires after today's meeting. I want to thank James for his outstanding service over the past 13 years. His extensive knowledge of utility economics of capital markets the mergers and acquisitions has been hugely valuable during the period of significant change and growth for the company. Next to him is Rachel Taulelei; then Rob Hamilton, who after James' departure, will chair our Audit and Financial Risk Committee; Susan Peterson, who chairs our People and Performance Committee, and on my left from the far end, [ Mike Taitoko ], who retires after today's meeting following 10-year service on the Board. I also want to thank Mike for his enormous contribution to Mercury, including his invaluable support in guiding and strengthening our connections into [indiscernible] over the past decade. Next is Adrian Littlewood, and [ Hanna Hambling ], who chairs our Safety and Enterprise Risk Committee. And finally, [ Mark Benz ], who is unable to attend today because he has an important family engagement. We're also joined by Chief Executive, Stew Hamilton, Chief Financial Officer; Richard Hopkins; and Company Secretary, Howard Thomas. Also present are representatives from EY who undertake the audit of the Mercury on behalf of the Auditor General and Chapman Tripp solicitors and members of Mercury's executive leadership team. The year ending 30 June was a challenging year, marked by tough generating conditions but the team remained very focused on its commitment to delivering for New Zealanders. Net profit after tax was $1 million. down $208 million from the prior year, primarily due to lower earnings and changes in unrealized gains or losses on unhedged electricity derivatives. Earnings before interest, tax, depreciation and amortization and fair value adjustments was $786 million, down $91 million on the prior year. This was mostly driven by below average renewable generation as a result of dry conditions. It just -- it didn't rain as much as we would have liked it to. Operating costs increased by $11 million on the prior year, primarily due to increases in generation maintenance and organization change costs to enable future cost savings. Stay-in-business capital expenditure was broadly consistent with the prior year, down $4 million at $138 million with good progress made on our geothermal drilling campaign. Growth capital expenditure was up $193 million on the prior year to $347 million with the second stage of [ Kiera Downs ] and [ Kawai ] wind farms beginning construction. Your Board was pleased to declare a fully imputed final dividend of $0.144 per share. This brings the full year ordinary dividend to $0.24 per share, up 3% on last year and our 17th consecutive year of dividend growth. Our financial year '20 EBITDAF guidance has been set at $1 billion. This ambition reflects significant reinvestment of capital with about $600 million of growth capital expenditure expected to be deployed on major infrastructural works. Ordinary dividend guidance for financial year '16 is $0.25 per share, which represents a 4% increase on financial year '26. And this would be the 18th consecutive year of dividend growth. I spoke to you last year, closely following the winter energy supply challenges which have bought the electricity sector into the headlines. We acknowledge this and ongoing challenges have negatively impacted confidence in the sector. We are working hard to rebuild that confidence through consistent and meaningful action. Alongside challenges, there are also significant opportunities which Mercury is well placed to pursue and with a clear focus on long-term sustainable value for our owners, customers, people, communities and New Zealand. This includes a focus on delivering reliable energy at least cost. The shift to using more renewable electricity is key for economic growth and resilience, and will play a major role in achieving the country's climate change goals. New Zealand ranks in the top 10 of the World Energy Council's Trilemma Index, which means which measures how countries balance energy security, affordability and sustainability. The sector is self-funding a major multibillion-dollar capital investment drive to help ensure the country retains its status as a global energy leader. In the past 5 years, the sector has invested $2.9 million in generation. And between now and 2030, a further $5.5 billion is expected to be invested. Between now and 2027 alone, over 4 terawatt hours of new renewables are expected to come online, and that is enough to power the equivalent of around 0.5 million homes. We're proud to be contributing a significant proportion of this with $1 billion invested in 3 major builds simultaneously under construction at the moment. Building more renewables helps with keeping the lights on, but it is not enough alone. We need more generation that runs when weather-dependent renewables like wind and solar for short to meet the country's energy needs. The market is working to address this such as through the agreement to establish a strategic energy reserve at Huntly Power Station. It sounds odd, but having this coal at Huntly is key for ensuring that the sector can keep building renewables, which will help lower New Zealand's emissions overall. We believe more transparency of the gas market information to support decision-making and clear investment signals for new solutions like batteries would also help fill the gap. The data tells us our electricity prices compare favorably with other countries, including Australia and the U.K. New Zealand's electricity is sixth best for commercial and industry and tenth best for household prices in the OECD. But we recognize any price increase for households and businesses in the current environment has an impact. This year, the main driver of household electricity price increases was the regulated lines and transmission increases. We've engaged with the Commerce Commission on the need to balance investment and minimize price shocks as well as promote investment in the smart system. Ultimately, the development of a smarter electricity system with greater use of things like batteries, could mean less network investment is needed. Gas is a key energy system challenge. Natural gas reserves this year were down 27% on the year before. As a purchaser and retailer of gas, we share the concerns of government, industry and consumers and are pleased to see a greater focus on the long-term gas outlook. We've begun providing information to our guest customers to make well considered decisions about their energy futures. Gas supply challenges have highlighted the importance of taking a whole of energy system view to market and policy evolution. We're hoping to see this focus on the government's ministerial review of electricity markets, which is expected imminently. The energy competition task for setup last winter is also focused on solutions that could help further strengthen performance of the electricity market. we continue to engage constructively on both fronts. Meanwhile, we're encouraged by the government's focus on making it easier for the private sector to keep delivering more renewables through resource management reform. This is critical to ensuring we can deliver generation at the scale and pace needed. Before handing back to Stew to talk more about how we are delivering value for New Zealand. We're going to watch a short video about our financial year 2025. [Presentation]

Thank you, Scott, for the introduction. [Foreign Language] Welcome, everybody. [Foreign Language] A year ago, I presented at my first Annual Shareholders' Meeting as Mercury's Chief Executive just as I was stepping into the role. The past year has been a year full of challenges and opportunities. It's highlighted the amazing foundations that we have with the team continuing to advance major generation developments and delivering value and care for our customers while delivering dividends for you, our owners. We refreshed our strategy late last year. During the year, we've ensured we're focusing on the areas that matter most to Mercury's long-term value. Our strategy starts with our purpose: [Foreign Language] taking care of tomorrow, connecting people in place today. And it flows to our focus to be better today, build for value tomorrow and being brighter together. This is through partnering and long-term success. Our immediate priorities are to deliver more generation, transform our earnings, capture energy transmission demand growth, rebuild sector confidence and build a connected and inclusive culture. This sees strategy was a natural opportunity to refresh our executive team structure to ensure we have clear accountability and strong alignment to our priorities. I'm really pleased to welcome several new executive team members, which bring a balance of fresh perspectives and deep industry and technical expertise. Most of the team are here today over in the front row over there and on this team here with Richard. I look forward to connecting with you afterwards alongside Mercury directors and many of the Mercury leaders who are dotted around the room in yellow T-shirts. I believe that we have the most capable generation development team in New Zealand that spans wind, hydro and geothermal development. We're in a really strong position to deliver on our ambition of delivering 3.5 terawatt hours of generation by 2030. That's an after power half of the Auckland homes. At the same time, we're advancing early-stage geothermal opportunities into post-2030 development opportunities. You've heard from Scott about the $1 billion investment that we've made in 3 major renewable builds that are underway. The Nga Tamariki geothermal station expansion near Taupo, the Kaiwera Downs 2 expansion in [ Matoda ] and Kaiwaikawe wind farm and the Fire North, they build in Southland and northern and across New Zealand, and they're all on track to deliver on budget and to time. We continue our long-term program to also upgrade our 9 hydro stations up and down the Waikato River to deliver increased output efficiency, reliability and to also increase the lifespan of these already long-serving generating assets. This $550 million of upcoming upgrades at 3 of our hydro stations, I believe to be the largest reinvestment in New Zealand's hydro history. These hydro assets have been a backbone of electricity system -- of our electricity system for generations. Being able to enhance their contribution to the country as a testament to the critical role that I have to play and their longevity. We are also investing $175 million into geothermal drilling to support geothermal generation, which is the unsung hero of New Zealand's energy story. Unlike other forms of renewable energy like wind, solar and hydro, geothermal was not dependent on the weather conditions. We can harness the underground geothermal heat to generate energy 24 hours a day, 7 days a week regardless of the weather. Our investment in generation not only delivers more renewable energy for New Zealand, but it also helps to improve reliability or to put simply keep the lights on and keep the heat is humming. Turning to our customers. We continue to focus on enhancing the value they receive with a range of smarter propositions benefits and service features. Our multiproduct offerings across energy and telecommunications continue to be popular with around 38% of our customers now on 2 or more products. Our key focus is enabling customers to shift their electricity consumption and lower their costs. And as you saw in the video, we are rolling out time-of-use solutions for all of our customers. Our smart hot water program is also being scaled following multiple successful trials. Beyond households, we are helping businesses to electrify where it makes sense and participate in demand management. In the past year, we began a long-term contract with the New Zealand element of smelter, making them now our single largest customer. We also signed on track with Fonterra and with Visy, who are a global leader in packaging, recycling and logistics. We acknowledge it's challenging for those judging multiple cost pressures in the current environment. Longer-term contracts are a key way to support our businesses in that respect. Our support for households, which include providing improved clarity of bills and pricing and consumption with greater choice and care for those that need it most is crucial. We are proud to have had 0 postpaid disconnections for customers in hardship since June last year, making over a year since we've delivered on that result. This is a result of both changes to our internal processes calibration with community partners and also to deliver comprehensive wraparound support for those customers. Our work with community to deliver lasting customer care was recognized as being a finalist in the community initiative of the year at the 2025 New Zealand Energy Excellence Awards. We continue to provide care beyond our own customer base through supporting social retailers like Nau Mai Ra and Toast Electric with wholesale contracting options and supporting industry-wide consumer care action. So to conclude, yes, there are many challenges that we are facing. But we will face these with confidence and a clear set of actions. At the same time, we are pursuing opportunities that deliver value for our owners, for our customers, our people, communities and New Zealand, better today, building tomorrow brighter together. [Foreign Language] and I will now hand over to Tim Thompson, our Executive General Manager of wholesale markets. Now Tim is going to speak to us further about our generation portfolio and the prospects that we have ahead. Welcome, Tim.

Thank you, Stewart. [Foreign Language]. As Executive GM Wholesale, I'm responsible for managing our overall electricity portfolio. This includes responsibility for all wholesale markets activities, and sales to large commercial and industrial customers. Now we have an advantaged resilient generation portfolio today that is diversified, complementary and low cost. For the large part, our generation is based in the North Island, close to main population centers. But we also have 2 wind farms in the South Island and are expanding on one of these, as you've already heard. This is beneficial because there's often varying weather conditions between the North and South Islands. Now this is illustrated on the chart on the screen, which shows catchment inflows into the Waikato hydro system inverse the South Island inflows and importantly, correlated to peak demand, which occurs in winter. We also balance our portfolio across generation types. For example, when it's windy, we might pull back on hydro generation. And when it's still, we can ramp up a hydro generators. Lake Taupo provides the primary storage for our Waikato hydro system. We monitor and manage the lake level carefully to ensure there is water available to support generation during dry periods and to look after the river environment. We do this with the support of the decision management platform with developed that leverages artificial intelligence to simulate, plan, optimize and optimize critical decisions we make. We call this platform the Digital River. Today, we use it for everything from unit rehabilitation planning to stakeholder engagement and generation reviews. The Digital River was a finalist for the innovation and energy awards at the 2025 New Zealand Energy Excellence Awards. Geothermal is another valuable feature of our portfolio and one we expect to grow in importance over the coming years. Learning from Digital River, we have been developing advanced tools and models using live data and machine learning to help us make decisions about how we operate a geothermal power stations. The goal is to generate more electricity more efficiently and more reliably. We're also focusing on maintaining and building our advantage in the future. About 35% of our ambition to deliver 3.5 terawatt hours of generation by 2030 will be realized through projects currently under construction and the hydro refurbishment program. Beyond these, we have several generation development prospects, which could be delivered by 2030. These include a battery energy storage system near our [indiscernible] more hydro station, targeted for completion around FY '28. And the [indiscernible] wind farms. We may also pull for potential geothermal developments and other development prospects currently targeted for after 2030. We will continue to consider a potential role for solar as well. [Foreign Language] Thank you. I will now hand over to our Chief Financial Officer, Richard, to talk about how our capital structure enables our growth and our focus on shaping performance. Richard?

Thank you, Tim. [Foreign Language] As Chief Financial Officer, I'm responsible for our financial performance and the legal and risk functions. It's a real pleasure to attend my first Annual Shareholders' Meeting at Mercury, having joined the company 5 months ago. It's great to be better in the world of energy, having specialized in power and utility sector transactions across the U.K. and Europe earlier in my career. One thing that stood out to me since I've joined Mercury is the great team that we have. This is a real asset when we think about how our energy system is transforming and the level of investment being made. Another is the history of value creation Mercury has because of the bold strategic choices it's made. That includes the decision to invest in geothermal in the 2000s and more recently, the acquisitions of Tilt Renewables and the Trustpower Retail business, which have significantly increased the company's scale. These choices have delivered real shareholder value and support our progressive dividend policy. Today, Mercury has established a lead position in wind developments and has exciting geothermal prospects. We're investing in these technologies to capture the future growth in electricity demand. And we're happy to stand out from the crowd in what we do if that's where the value is. This includes value we create with others like [Foreign Language]. I thought it was important to highlight how we make how we invest the money that we make as well. So throughout FY '25, just over half our earnings went straight back into building and maintaining the assets power in the country. This supported continued growth investments, including our 3 major renewable builds underway. We paid out $256 million in dividends to you, our shareholders, for investing your hard-earned money with us. The remainder of the income we made went to paying our interest and tax bills, meaning, overall, our net debt increased by $230 million from June 2024 to $2.2 billion in June 2025. We're here to deliver long-term value and maintain the strong total shareholder return performance that's been built over time. On this slide, I wanted to talk about lowering our operating costs, which is a key priority for us. We know that we must be efficient and effective in everything we do. Our goal is to reduce our OpEx to $ 370 million and hold that level through to FY '28. Look, that's a tough target given the inflationary pressures and the additional costs associated with bringing [indiscernible] Stage 2 and [indiscernible] wind farms online, but we're committed. Since November, we've been running a structured enterprise-wide cost reduction program with strong executive backing. This is not about cutting costs for their own sake. It's about ensuring that we're creating value and ensuring that we compare well against our peers. By FY '28, we're targeting a 30% reduction in our operating cost per customer connection, driven by greater use of technology. We'll keep you up keep -- we'll continue to keep you updated on our progress as we deliver to this commitment. But to conclude, look, I'm really excited for the future and the credible pathway Mercury has, better stay, building tomorrow, brighter together. [Foreign Language] thank you, and I'll hand back to Scott.

Right. Now we move to the formal business of the day. As mentioned earlier today, we have 4 resolutions. After each resolution, we will pause for questions on that resolution. All voting at today's meeting will be by way of poll. And accordingly, in my capacity as Chair, I will require that a poll be held for each of the resolutions. For those here in person, shareholders who are entitled to vote and proxies who have discretion as to how they vote should have either the voting form that was sent with the notice of meeting or an alternative voting form given to them by Computershare when they registered upon arrival. If you completed a postal vote, you do not need to complete another voting form. If you have not received a voting form, please go to the Computershare desk located outside this room, where their representatives will be able to assist you. I will invite you to vote after all resolutions have been introduced to the meeting. Voting will close at the conclusion of questions. voting forms will be collected at the end of the resolution and voting section of the meeting by the Computershare team who will act as scrutineers, and the results will be posted on NZX and ASX later this afternoon. Resolution 1 relates to the reelection of Susan Peterson as a Director. Susan was appointed a Director of Mercury in September 2022 and is the Chair of the People and Performance Committee and a member of the Audit and Financial Risk and Nominations and Corporate Governance Committees. She currently chairs Vista Group, and as an Independent Director of Xero and Craig's Investment Partners. As a business leader, Susan has helped companies to drive growth through technology innovative customer solutions and organizational culture. I invite Susan being eligible for reelection, to address the meeting.

Thank you very much, Scott and [Foreign Language]. It's great to be here. So thank you very much for the opportunity to present my credentials for reelection as an independent director of Mercury. As Scott has said, I've been really a full-time director adviser, investor for more than a decade now, and I currently chair ASX NZX-listed company lister Group, which is a global film distribution software company and an ASX-listed global SaaS company, which is listed on the ASX called Xero. I'm also a director on the private wealth, institutional equities and investment banking firm Craig's Investment Partners. Some of my past roles have included directorships on ASB Bank and NZX-listed property for Industry [indiscernible] Group. I've also served on the board for not-profit global women. And for the last 6 years, and also I say 9 years on the New Zealand markets disciplinary tribunal. I've worked with a wide variety of firms, both big and small and public as well as private. And as Scott said, I have a particular passion for helping companies to drive growth and productivity through tech, innovation and great culture. Also relevant to the mercury role is that I was a director on the Board of Trustpower for 7 years and the year following the sale of the Trustpower retail business to Mercury, I was approached by the then chair of Mercury to consider joining the Mercury Board to support the company to maximize the opportunity with what we have here, which is [ RTRO's ] largest bundle utility retail business. So it's been an absolute privilege to serve and be a Director of Mercury for the past 3 years and during such a challenging time for the energy sector and T. As director, I am passionate about finding ways to carefully and successfully balance the need to ensure that our country has reliable and affordable renewable energy to support our collective success. It is very much not easy to achieve this balance. In addition to serving as a nonexecutive director, as Scott said, I also Chair Mercury's People and Performance Committee and also members of both our Nomination and Corporate Governance Committee and our Audit and Financial Performance Committee. So I've had the privilege to cheer our People and Performance Committee through what has been another important period for Mercury Highlights over this last year have included the international market search that resulted in the appointment of our CEO, Stew Hamilton; and the appointment of Richard Hopkins as our new CFO. It's fantastic to have their talent on board. It's also been to reflect our internal succession process is enabling the promotions of Tim Thompson as Executive General Manager of wholesale and Matt Tolcher as Executive General Manager of Generation Development. And also to welcome Catherine Thompson as Chief Sustainability Officer; and Kevin Taylor as our Chief Operating Officer for Generation. An important part of this has been the evolution of our people and remuneration structures to attract, motivate and retain the leadership talent we need to successfully execute on this growth strategy. I'm a very strong advocate for creating environment that facilitates attracting and retaining high-caliber talent at Mercury and supporting our purpose-driven, high-performance and very much inclusive culture. Another key aspect has been the implementation of a new performance management framework that embeds simple and clear results, focused targets and to strengthen our link between pay and performance. And I'm really excited about continuing to work with the Mercury team to realize the opportunities ahead and to navigate the inevitable challenges we face. So look, I would very much appreciate the opportunity to continue to serve on the board and to assist the team and the supporting Mercury's ongoing success. Thank you and [Foreign Language].

Thank you, Susan. So are there any questions on this resolution? Just want to make sure that I can see Okay. There being no questions, I move as an ordinary resolution that Susan Peterson be reelected as a director.

Scott, there is 1 question online. Okay. Susan, what do you consider being your most valuable contribution to Mercury? .

I think as a director, you don't really have the ability to or the right to express and demand your own views on things. So I think a really terrific director and something that I try to focus on is unlocking the power and capability of the people that sit in the room. And collectively, we solve problems together. And I try to create an environment where people feel psychologically safe so that, that can occur effectively.

I would also add to that, that there's been material work undertaken in the people function and the talent function of the enterprise over the last 12 months. And Susan has been the tip of the spear in terms of the Board's efforts in that regard. So there being no further questions, as I mentioned, I move that as an ordinary resolution, Susan Peterson be reelected as a director. Resolution 2 relates to my reelection. So I'm going to pass to James Miller, who is Chair of the Audit and Financial Risk Committee to present this resolution.

Thank you, Scott. Scott was appointed a Director of Mercury in September 2017, became the Board Chair in January 2024. Scott is the Chair of the Nominations and Corporate Governance Committee, a member of our People and Performance Committee, Audit and Financial Risk Committee and safety, enterprise and Risk Committee by virtue of his position as Board Chair. Scott has also Chair of ANZ New Zealand and a Director of ANZ Group and the Next Foundation. He has extended some background and investment advisory and capital markets. I now invite Scott being eligible for reelection to address the meeting.

So ladies and gentlemen, I offer myself for reelection. My background is in financial services. I started life as a financial analyst and completed that league of my career circa 30 years later as the CEO firm now known as Jarden's. Towards the end of that time, I served on the Council of the University of Alton ultimately becoming the Chancellor, and that was a springboard into a governance career that saw me move on to the Board of Fronterra and becoming Chair of Fisher & Paykel Healthcare. The current major roles, as James mentioned, are as Chair of the Valiant New Zealand and as a Director of ANZ Group and my Mercury role. And I've been in the role of Chair for around 1.5 years. During that time, the Board and I have overseen a lot of change, most particularly the CEO succession and the process and the consequent changes to the management team. in the context of being able to plan ahead, I am offering myself for reelection for a final 3-year term. I am a shareholder, and I'm very committed to the business and ask for your support for my candidacy. Are there any questions?

Okay. Thank you, Scott. And are there any questions on the resolution? Straightaway.

Are we allowed to ask about AI? What we think of it, how you're going to use it? What you're now about it?

Yes. We would normally do that in general business, if you want, but I most certainly bring it up then.

Yes. If he's kind of like introducing it in here.

Sure. So when Tim was presenting just a little bit earlier about what we're doing on the river to try and optimize the water that we have, one of the most important initiatives that we've had over the last couple of years is what we call this digital rift. And that's utilizing AI to optimize every drop of water to deliver stronger earnings to the business. And have we disclosed what that's been worth to the business. Yes. So we've managed to get about $10 million out of that. Now I won't stop there. Obviously, there is a whole lot of other stuff that we're looking at. We're looking at a kind of an equivalent situation in the geothermal space to see how we can optimize the but there's also -- there are so many applications in terms of how we interact with stakeholders, most particularly our customers. And so there's a lot of investment going on into that space. Hopefully, that helps. Okay. Further questions? Online?

There are no further questions online.

Okay. I'll move the resolution. I now move an ordinary resolution that Scott St. John be reelected as a director.

Thank you, James. Resolution 3 relates to the election of Rob Hamilton as a director. Rob is an experienced business leader and Director and an experienced Chair of Audit and Risk Committees is currently a Director of Westpac New Zealand, Oceania, health care, Tourism Holdings and Cypress Enterprises. Rob has more than 3 decades experience in finance and capital markets, including as Managing Director and Head of Investment Banking at Jarden and Chief Financial Officer at SkyCity Entertainment Group. He has also advised several major New Zealand energy companies. I invite Rob being eligible for reelection to address the meeting.

Afternoon, everyone. I'm Rob Hamilton, and I was appointed as a Director of Mercury in April this year. Today, I'm seeking shareholder support for election as a director. As Scott said, my background spans over 30 years in New Zealand's capital markets and finance sector, including executive roles as CFO at Sky City and Head of Investment Banking at Jarden. For the past 5 years, I've pursued a career in corporate governance and also undertaken various consulting roles. I'm currently a Director on the Boards of Tourism Holdings, Respect New Zealand, Oceania Healthcare and Cypress enterprises. I also chair the Auckland Grammar School Foundation Trust, having had a long association with the school. From my time at Jarden, I have significant advisory experience in the New Zealand energy sector. I led the Jarden teams advising the government on the IPOs of Mercury or Mighty River Power as it was then and Genesis Energy. I have also advised a range of other major energy companies in the New Zealand sector including Meridian, contact, Vector and well networks. At Mercury, I'm a member of the Audit and Financial Risk Committee and subject to being elected have been nominated to replace James a chair of that committee. I have significant experience in all audit, financial and risk matters from my past executive experience and current governance roles. Mercury is a great New Zealand company and a leader in the New Zealand energy sector. As a major generator and retailer of electricity, Mercury performs a critical role and supplying essential energy needs for homes and businesses throughout the country. In my view, Mercury is playing a positive and active role in New Zealand's energy transition and providing confidence in our energy sector. As Stew and Scott have outlined, Mercury has a significant pipeline of new renewable generation projects as being proactive in ensuring security of supply and is looking out for our vulnerable customers experiencing hardship. If elected, I hope to bring valuable strategic financial and capital markets perspectives to the Board I also look forward to contributing at a governance level to Mercury's continued growth and ongoing leadership in the sector. Thank you for considering my election. I look forward to your support and ask for your vote. [Foreign Language].

Thank you, Rob. Are there any questions? Anything online?

Yes, we have 1 question online. Rob, what do you see as a major macro risk for Mercury Energy?

There are a few major macro risks for Mercury. An obvious one is the regulation that we -- regulatory environment that we exist in and how that might change going forward. Another would be essentially relating to the energy transition, how Mercury responds in terms of both continuing to build further renewable generation, but also responding in terms of providing firming or peaking plant. So both of those risks relate not only to Mercury, but also to the entire sector.

Are there any other questions? Anything more online?

No further questions online. .

Okay. Thank you. I now move as an ordinary resolution that Rob Hamilton be elected as a director. The next resolution relates to the election of Rachel Taulelei as a Director. Rachel is an experienced business leader and a director and advocate for the Maori economy and values-based business models. She currently chairs Moana New Zealand and as a Director of Sealord, the Warehouse Group Wellington International Airport and ANZCO Foods. She is a co-founder of [indiscernible], a business design and brand strategy agency and was formerly CEO of Connor, a Maori-based food and beverage company. Rachel was also the North American Trade Commissioner. I invite Rachel being eligible for election to address the meeting.

[Foreign Language] Good afternoon, everyone. My name is Rachel Taulelei, and I've just acknowledged chair, Scott [Foreign Language], and all of you in your respective capacities. I've also acknowledged my own for [Foreign Language] or place of home, [Foreign Language]. It is an absolute pleasure and a privilege to be here with you today seeking election as a new potential appointment to the Mercury Board and also to meet some of you on our way in this morning some very long-standing shareholders of Mercury and some new members and attendees to the Annual Shareholders Meeting. So pleasure to meet you all this morning. Very briefly, I held from the mighty metropolis of Otake. Some of you may have been there, but I have lived most of my life in Wellington, just period of that living in the United States in Los Angeles for 8 or 9 years with New Zealand Trade and Enterprise. And my husband's name is Walter, and we have 1 daughter Lilly, who is currently on a basketball scholarship and earning a business degree at Iowa State University in the Midwest of America. My professional life is occupied with my brand strategy company as Scott has said, Oho, and a number of directorships, which you have heard of already, but it's The Warehouse Group largely, ANZCO Foods, Wellington Airport and Sky Stadium. In fact, being here today is actually a little bit difficult for me because in Wellington, we have almost a terrible record with the ore blacks. And so to be in these hallowed halls which over has all of the right conditions for a win a couple of weeks ago as opposed to the game, we host is a little bit of a tough ONE for me team. But it's great to be here. And of course, I digress because in addition to the roles that I've spoken of, I also chair the New Zealand Rugby appointments and remuneration Panel and the sustainability panel for Fonterra. Within the boards that I sit on, I hear a number of subcommittees, including environmental and social sustainability, people remuneration and also health and safety. And for fun because I'm an active relaxer, I am the owner of a pro women's basketball team, and I chair at Elan Trust. I'm going to literate hearing a walker Victoria University of Stanford University, and I'm a member of the Institute of Directors. My professional life, as you may have gathered from that as one characterized by a varied number of live experiences. I've spent the vast majority of my career working in trade, in the primary industry and advancing the interest of and opportunities within the Maori economy. I have formed and divested my own businesses over those years and hope to bring a couple of complementary views and experiences to the Board of Mercury. The first of those is that I bring a very entrepreneurial mindset, having been in business my own and others for the times that I have done. I also have a very deep commitment, as Scott alluded to, to values-based businesses, which is something that attracted me to the Board of Mercury. And finally, why I'm wholeheartedly commercial, I also bring a demonstrable relativity connectivity in the way of communicating with shareholders that I think has served me well in my professional life thus far. The Mercury Board really represents to me an opportunity to contribute to the conversation around critical infrastructure of [indiscernible] and in this vein mercury leading the way. It is about ensuring bakes access to affordable and renewable energy. My professional practice has always been to jump into challenging environments to jump into companies and industries, which from the outside, if you look at fishing, dairy and farming might suggest that there are some headwinds in and around sustainability. But my MO or my way of working is to jump right into the heart of those and try to have a positive influence from the inside. So I look forward to doing that at the Mercury table along such a strong executive and also governance team. To conclude, as I said, it's my absolute honor to be seeking election as a director on the Board of Mercury. I would very much appreciate your support. [Foreign Language]

So are there any questions? Anything online?

There are no further questions online, Scott.

Okay. So I now move as an ordinary resolution that Rachel Taulelei be elected as a director. For those in the room who wish to vote on these motions, please tick 1 box to select for, against or abstain along each of the resolutions in the section marked on your voting form. If you hold a proxy on behalf of a shareholder, you will need to cast that shareholder's votes in order for them to be counted. Where there are undirected votes, proxy holders may vote these as they see fit by ticking the appropriate box. It's worth clarifying that all directed votes are treated as postal votes and proxies need not complete a voting form in respect of directed votes. Finally, in all cases, please ensure that the voting form is signed. After voting, please place your form in one of the ballot boxes, which will be passed around the room. If anyone is unsure how to complete the voting form or hasn't got a form, please go to the registration desk where someone will be able to help you. Once all votes have been cast, that will be counted by Computershare. The results of today's meeting will be released to the NZX and the ASX on completion of the verification of voting. Please prepare your forms and vote -- and cast your votes now. In a minute, I will close the voting system. Please ensure that you have cast your vote on all resolutions. So now I'm just going to pause for a little while to allow you to finalize those votes. [Voting]

Has everyone managed to get their documents into a box. So we all right out the back, we're right over here. We just got 1 more to come in. Okay. Perfect Okay. Well done. Voting is closed. Computershare please collect the papers. We will now open the meeting to questions on general business from the floor, which have been submitted during the course of the meeting. I will take questions from the floor first. So any questions?

My name is [ Roy Tews ], and I've been a long-time customer in Mercury. But I recently changed by address the power continued unobstructed great. But after 6 weeks, I hadn't received an account. So I thought, well, I'll just check what's going on. I rang the customer services and the answering phone automatic system said, the core will be answered in 61 minutes, well, I've got a bit more to do than sit around for 61 minutes, hung up, and I thought I'll do it again tomorrow. So I rang the next day, same thing, and I was told it will be 63 minutes delay. So I kept the option of taking that delay and lo and behold in 60-odd minutes, the call came through. The operator discussed the matter and said, look, I'll just check with the ability to, oh, it's 4:30. They're closed now, so I'll have to check that tomorrow and get back to you. I never heard I think the next day -- so after 2 days, I ran again. Again, I think it was a 59-minute wait time on the customer services, customer services or is it some other service. But I went through the girl said, "Oh, yes, that was checked and it was validated your account is coming out, but no one had come back and told me even though customer services said they would. So I think you need to just put a little bit more resources into customer services, anything up to an hour is just ridiculous.

Well, I think what I need to do is apologize to you because that level of service is below the standard that we would hold ourselves to. So my apologies. So I think perhaps, Stew is it the right thing and one of have a chat to this gentlemen after the meeting. So one of our team will find you, sir, after the meeting is closed. Other questions?

Grant Plume shareholder. Funny enough, my phone just told me it was time for me to stand.

That's a clever phone.

On the Board, we have some of the greatest financial wholesale mines in New Zealand. But we have the situation where we make quite a good net profit. But then we have unrealized losses on unhedged derivatives and hedge and effectiveness through the income statement. And that's quite a mighty amount, $340 million. So we're suddenly down, we got $1 million profit instead of bringing a good profit. I mean overall, Mercury, it seems it's traveling along very, very well. It was a hard year because of, obviously, water situation in the Waikato and the prospects of renewable energy looks fantastic. But when the bottom line is a white with derivatives loss. I'm just wondering what's going wrong with the derivatives. What are the derivatives contributing to the profit and the earnings of the business and what can be done, so we don't see these losses again?

I hear you and I understand your frustration with that matter. So we are bound by the accounting rules in terms of what we put through the profit and loss and what we don't. We -- as you would imagine, we have quite a bit of hedging or financial insurance, if you like, right across the portfolio. And as prices move we have to mark to market. And at the end of the year, sometimes those contracts are in the positive and sometimes they'll be in the negative. Now over time, it all washes through. But what it does do is move the P&L around a little bit like a hand with our hose without a hand on it sometimes. That is why most of the analysts look at a measure of profitability at the earnings before the EBITDA at the EBITDAF level. Richard, do you want to add anything to that? I know you enjoy the contracts.

Yes. There's -- now look, you've covered it really well, Scott. They're actually -- when you look at that negative, there were 2 big components. There was one which is the Manawa hedge, which became less positive than it was. And that's actually -- that's the manual hedge running down in time. And then the other 1 was the long-term contract that we've put in place for 20 years with -- the aluminum smelter. So with electricity prices high, it's negative, but we think we've got a good price in the long term. So you're absolutely right. Look at EBITDA first, that's the real measure of the cash that we're generating, not the accounting.

And look, I can't -- what we're looking to do is grow our earnings aggressively over time if you sort of even out hydrology. What I can't guarantee is what these hedging contracts impact on the P&L will be other than to say there will be pluses and minuses. But if you draw a line sort of through that, we're very confident in the financial prospects of the company and our aspiration is to continue growing.

[ Chuck Bird ], shareholder. I watch Sky News, and I noticed big debates about power and that there, and it seems that government plays a major role in that issue, and it's argued by the opposition. I just wonder how things work in New Zealand. The government's got a 51% share. Do they get involved too much telling you how to do things?

No. Look, the government is a very supportive partner of ours and in spite of them being a 50% shareholder, they're not involved in the operations of the enterprise -- we maintain healthy levels of communication with the New Zealand Treasury, which ultimately works its way through to ministers. But the government is not involved in sort of pulling levers inside the business. Rob referred to this a little earlier, but there is obviously a regulatory sort of overarching framework in which we operate in the government obviously responsible for that. But putting that to the side, the sort of connections that we have with government are really limited to ensuring treasury is up to date on what we're doing and occasionally meeting with ministers just to ensure that they understand what we're up to as well.

Hello. My name is [ Shabir ], a shareholder. Now first thing I would like to complement the Board for the excellent performance. We have given a good performance financially and you deserve some place for that. Apart from that, I've got some 3 other issues, which I will discuss one by one. The first one is about the gas. Now as you say, the gas is going to dwindle over the years. We don't generate gas over the year. Mercury doesn't generate any gas. The government wants to generate gas, but I don't know the political atmosphere doesn't allow it to generate gas. Now I want to know whether I have been using Mercury, I am a customer of Mercury. I'm using gas for even heating my hot water cylinder. Now why don't you offer me any alternative so that I switch to electricity because the cash cost, as I analyze over the period of time, it is skyrocketing and nobody is able to offer me an explanation of how the gas is converted again into energy thing and then it is charges as an energy variable only. So I have been actually -- I support that first customer that I'm trying to contract this customer service, but it is very difficult to contract. And I'm not getting any proper answer from the customer service. I will also speak to him with my detailed analysis of how the customer is service is coming to me. It is not at all, I mean, at the level of which Mercury is there. So I like a little bit of improvement in the customer service level also.

So is your question, how can we help you transition from gas to electricity?

That's right. That's right.

Stew, do you want to...

Can I finish all my questions? Or do you want me to go on?

Okay. You are here if you do that quickly, and we'll deal with them one at a time.

So this was the other one. Now secondly, the third gentleman who said about the government interfering with the profitability. Now I would like to say because the government is getting such a high dividend -- so they will definitely not interfere with the mercury performance there because they are very happy with Mercury's performance. They are getting $0.25 of dividend also. So that is my observation of that. Thank you very much.

Right. Thank you very much. Stewart?

Thank you. So gas, definitely acknowledge that the price of gas has been going up over the last couple of years. And that's not just for households, that's across New Zealand and especially in the businesses as well. So definitely a thing we're seeing primarily being driven by the lack of gas coming out of the fields in New Zealand, actually, the gas supply in New Zealand has dropped off by nearly half over the last 4 or 5 years. So Mercury, as you mentioned, is a buyer of gas. So we largely buy gas and then we pass that through to our customers, and that results in prices going up. Now in terms of electrification, it's basically the best way to move from gas, whether that's hot water heating or space heating electrification is the best way to move away from gas consumption and gas usage. We have a number of initiatives inside are that are looking and exploring and not just aside Mercury actually across industry, looking at how we actually support customers, whether it's household or businesses from transitioning from gas to electricity. That will be something which will grow over time. But at this stage, really, there's no specific mechanism to support customers to transition from gas to electricity, but it's something that we are working strongly to assess. So I appreciate your feedback, and it's something which we're doing work on.

Thank you. [ Ray Williams ], shareholder. A year, 2 years ago, the buzzword was hydrogen. Is there any room for hydrogen in our energy usage?

In a global sense, I'm sure there will be hydrogen applications. But at the moment it's not at the top of our list of things that we're considering. But Stewart, do you want to just fill us on that?

Yes, , you might have seen that there was actually a project down the Deep South to look at hydrogen coming on stream and that was dropped off by the -- I think it was Meridian and Contact, who were looking at the time and fundamentally because the cost is significant. So the main reason you're looking at hydrogen is for 2 things. Firstly, you're looking at hydrogen as an alternative gas energy form as per the previous shareholder. And secondly, it's potentially an export value for New Zealand as well. But primarily both of those things will be cut off by the fact that hydrogen is very expensive at the moment. So if we're looking at other forms of energy to enable us to move away from fossil fuel and fossil guesses at the moment, electricity is still cheaper than going to something like hydrogen.

Can I ask just one more?

Sure.

Chairman, you're saying this is your last term what provisions are you making for your successor?

So we have an active -- right throughout the organization, we do succession planning, whether it's on the board or in the senior management team. And so for each of the -- each of those roles, we have, I guess, a list of folks that might be eligible in time. We sort of think about it whether somebody is reading now, whether they -- we need to develop them a bit further or whatever, but it's something that we actively work on, and that's certainly the case for my replacement. We have a number of people who could very comfortably step into the breach. Yes, yes. And we also -- that planning extends to sort of big red bus scenario. So if I was to be -- to connect with a bus, there are -- we have mechanisms to tidy that up.

Yes, good afternoon, every I have a question for Mercury. I would like to see the option of shareholders given the option of a cheaper power plan than getting a dividend? I have been with Mercury shares since they floated from the very beginning. I know you can compile your dividends to more shares, but I'd also like to see the option of a better power plan.

Right. I'm not sure what the mechanics of that might be, but I understand where you're coming from. I'll need to just take that away and think about it with the CEO. Other questions? Sir?

[ Neil Hart ], small shareholder. I was just wondering why the votes of the -- for the 3 new directors haven't been John on the screen, not the people in the room, but the biggest shareholders?

One of the -- there's reason sort of discussion around what the right way to go about this is, but one of the ways we think about this is that we don't want to influence the room by showing what the running tally is, we want people to kind of make their own mind up and I guess our sense is if we were to show that number up before the voting occurred that might have the potential to say folks in terms of the way they vote. So that's really the thinking about it.

My name is [ Vincent Riego ]. I've got 2 questions. One will be -- the first question is for the CFO, please. I think there's going to be a substantial increase in the debt? Am I right? Going forward, a substantial increase in the debt?

So as we continue to invest in new generation assets, yes, our debt will increase in terms of -- is it substantially yes, it's a significant amount, but it's still going to be well within our current credit rating. So it's not something I'm concerned about.

But what I would add to that is we are investing with a view to increasing our earnings. So our ability to service that debt is increasing materially as we go.

And then since there is so much pressure on the bottom line, with the $1 million net profit. How are you going to service this increased debt? That is my first question. And the second one...

That $1 million is after servicing the debt?

After servicing the debt, but with this increase in the debt and pressure on profits I presume you have a well thought of plan service to service it.

Just we have a bunch of disciplines in terms of the way we think about our debt our forward planning, our operational expenditure, our capital expenditure, and we are operating well within the bounds of the limits that we set for ourselves. In fact, sort of looking forward there are some analysts that are suggesting we look a little bit on the conservative side. So it's -- we look very, very closely at it. You're on the right track in that regard, but we are very comfortable with where we're sitting in that regard.

Going forward, are you considering raising debt from retail lenders?

Yes. So we fund ourselves, we've got about $2.2 billion worth of debt averment and it's -- we do have some retail bonds there. So as the different funding comes up, some of it is renewal of existing debt, and it will be new debt. We will look at what sources make more sense, which might include retail debt, yes.

And the second question will be for people and culture, what do you mean -- because more than 1 director has made a mention of inclusive culture. What actually do you mean by that?

Well, I'll have a crack at that first. So New Zealand is a very diverse population. We have a bunch of demographic changes that are taking place, including aging. And we need to ensure that we are attracting the best possible talent to execute on our strategic plans. So we don't want to be hiring just out of one segment of New Zealand's population. We want to ensure that we are hiring out of the entire population to ensure we get the best talent. But Susan, do you want to add anything to that?

Look, I think you've summed it up really rather well. I mean we're planning for the workforce of the future. We need to be relevant for all of that talent and they come all shaped sizes, ages, ethnicities genders and works. And if you look at what the composition of our big cities are going to be like in the rest of the country, you quickly get into big structural shift that we need to make sure we're attractive to the people that are actually going to be in our communities during that time. And that requires us to adapt, not force our community to change themselves. So that's what we think about in terms of inclusion.

In several countries in the world, they have they've started to plan or build next-gen nuclear power stations also in the common world. And as I've heard in Wellington, a discussion of that being applicable for New Zealand has initiated as well. So if that comes through politicians have made a decision on that, would Mercury in general, be thinking of being part of a consortium to build a nuclear power plant in New Zealand? And as your debt levels are moving towards 2.5 to 3x with the projects on board already, is there actually the option of doing so?

So I'm -- nuclear is not something that we're contemplating at the moment. I would imagine that if government started to ask questions around that and start consulting. We would be part of that consultation process. So I would imagine that we would be involved to that extent. That said, we have a really, really strong pipeline out over the next 10 years in terms of expanding our generating capacity, whether it's with regard to wind assets that we're developing, complementing them with batteries, the possibility of solar perhaps that would please James down in the measurably. But also, we are very, very, very excited about what we might be able to do in geothermal. There's a lot of change in the science of geothermal occurring. And we are very optimistic that, that's going to expand the prospectivity of the acreage that we control and allow us to go further into that acreage drill more holes and make geothermal a more substantial part of our energy generation stack. If we can do that, it is quite transformational for New Zealand because it really balances up the variability that we have around some of the other assets that we have.

[ Cameron Stewart ], IPO shareholder, bondholder and customer. My question is regarding the [ Mystic ] solar. New Zealand is at the bottom of the world, 2% uptake, 2%, 3%. The rest of the world is 30% to 40%, okay? And my first question is, what is Mercury doing as far as trying to get some subsidies from the government to initiate more uptake? That's my first question. My second question is, I have 2 properties. One is the holiday home, and I live in Auckland, all right? And putting solar on or holiday home, okay? So you're going to buy back my electricity at $0.08. And then when I use it in Auckland, you're going to charge me $0.30. Point taken. Second question, could all those people on the Board of Directors put your hand up, that are electrical engineers. So state of affairs, and thank you.

Right. So we are not in discussion with the government around subsidizing solar. That's something that the government will decide. I'm sure if it believes it is a sensible thing. Stew, do you want to make any comment in terms of sort of solar coming back into the grid?

Yes, sure. So it's one of the -- certainly acknowledge that rooftop solar will have a increasing role to play in New Zealand over the coming years. And New Zealand will start to move towards some of the other places like Australia and particularly South Australia. There are -- to your point around buying rooftop solar power at $0.08 and then selling it back at $0.30. The big issue with solar is that solar has produced between sort of 8 a.m. in the morning and 5 p.m. in the morning when there's actually not a huge demand for solar. And most people actually use a lot of the power in the mornings and the evenings when there is quite a lot of demand. So actually, what you'll see is the price of power moves quite significantly throughout the day. So it's not that companies are buying solar at a different price and then giving it back to you at a higher price is actually moving power around the days from cheaper periods through to more expensive periods based on the demand, which largely matches things like peaks and troughs during the day.

Yes. So when people get up in the morning, demand goes up a lot. When people get home, then it drops off when people get home at night from work, demand goes up a lot. So other questions? At the back.

[indiscernible] shareholder. In relation to geothermal, there's a current trend to reinject the CO2 back into the ground, which is great for the environment. I just wonder how many steps have been taken to make sure that it's not affecting the environment subsurface?

Yes. So just for those to understand, so geothermal largely is pulling up fluid from under the ground up to the surface to extract the energy and then we reinject it back into the ground or back into the reservoir. And there is an amount of dissolved carbon oxide in that liquid to that, Brian, when you pull it out of the ground. And some of that is released into the atmosphere. So even though geothermal is a renewable form of energy, it does actually emit a small amount of carbon oxide. Over the last few years, micro has been a bit of a pioneer and looking at how we capture that CO2 and then reinject it back into the ground, a little bit like solar stream bottle when you kind of push the button and you reinjected the CO2 into the liquid. We have an enormous team of highly capable geophysicists and geologists that actually do a lot of monitoring of the reservoir and actually look at for the reservoir we're doing that on a place called Nga Tamariki. They look at a lot of data to understand is that CO2 still staying dissolved inside the reservoir? Or has it been emitted elsewhere so we have a lot of data. It's one of the reasons why we have been taking it relatively slowly to make sure we test 25%, look at what's happening in the reservoir, look a lot of data to understand it and then we go further and all the time we've got teams inside Kevin's team actually monitoring that risk via very, very closely.

Other questions from the floor? Ma'am.

[ Barbara O'Connor ] from the New Zealand Shareholders Association. I have 2 questions, and they really arise from comments that were made at the AGM last year. And the first 1 is in relation to how Transpower was going to bring future benefits to the company. And it's been silent on that this year. And I wonder are you actually achieving the benefits that you anticipated from that merger? The second question is in relation to the international trip that was taken about 2 years ago or slightly more, looking at new projects. And I wonder what has happened in the last 12 months and what projects are coming out of that international trip?

Just dealing with that first. So with the international trip essentially, that was focused on -- well, there are several legs of it. There was a bit of AI, but a lot of it was around new technologies. None of those we have deployed as in New Zealand, but we are deploying new technologies in New Zealand. With regard to your first question, I think did you perhaps mean Trustpower rather than TransPower? Okay. Okay. So we're well through that process of integration. We're very happy with how that process has gone. We are getting synergistic benefits out of that merger. Stew, do you want to add anything to that?

Yes. So the synergy benefits, I think, a $36 million have been achieved out of that integration. So that's now -- they've been to live, and we showed those at our full year results recently and also talked to them at our Investor Day back in June. So we covered that pretty extensively in terms of the benefit. And the other really key benefit that flows on into the future is the ability for us to bundle products. So Trustpower had an amazing product suite of power co options, in particular, broadband. Mercury now is the fourth largest provider of broadband into New Zealand households. And we have 38% of our customers that have 2 products or more. So taking on that capability from Trustpower has been bought into Mercury and it's much, much stronger in that space.

So I'm going to switch to online because we've got a few questions starting to bank up there. And the first question from Mr. Grant is what are the risks of Mercury not achieving $1 billion EBITDAF for the 2026 year. So when we set these targets, what we're trying to do is be aspirational but not to be reckless. We tie this stuff back into our management rewards and incentives system. So there is nothing in particular that we are facing that would knock us off the rails other than the kind of obvious commercial risks that sit in the world that we sit in, and the most obvious of those is hydrology, to what extent does it rain because that affects how much water we've got to use in the lake and subsequently down to Waikato. We've had a good start to the year. Being no surprises there. July was pretty wet. And so we're going well. But it remains to be seen what the rest of the year will bring. Got another question from Mr. [ Bush ]. So it relates to data centers existing and proposed and the energy requirements they might have, can we comment on the impact on the current network and what these are likely to have on consumer pricing. Okay. Stew, I don't -- do you want to have a crack at this? But we are actively involved that won't surprise you with talking to folks who are thinking about data centers. One of the tone of the ways we think about this is that if there is a proposition, what we might do is try and tie one of our developments to that proposition to match the energy with the demand. But Stewart, do you want to add to that?

Absolutely. So data center definitely have a future to play, probably quite a big feature to play even in New Zealand. We've actually been part of supporting a study, which has been conducted over the last few months really and was presented last week in Wellington that actually outlines the future of what data centers look like in New Zealand. We believe it's got a huge role to play. And so we have a key role to play in providing electricity to that. Really good examples of what has actually already been done in New Zealand. Our [indiscernible] wind farm out to South wind farm. Actually, half of the output of that 1 farm goes to Amazon Web Services. So actually, we're already significantly involved in providing power to data centers. The really good thing that Scott alluded to is that having large loads like data centers give us the confidence to build more and bigger generation development projects. And what that does, ultimately, it creates more load in the system, which actually creates more stability and will, over time, actually improve affordability as well. So it's a really important factor is that it creates the confidence for us to keep building new renewable generation, which will support all New Zealand.

So Mr. Grant has asked a question with regard to Q1 earnings and how we're sort of tracking. I think I mentioned we had a good start in July. We have continuous disclosure obligations to the exchanges that we trade on and we have indicated the $1 billion is the target, and we're still on track for that. So other questions from the floor -- from the online? We have another question from Mr. Grant. All major generators are ramping up electricity production. It seems to me will have surplus generation capacity by 2032. This will have a significant negative EBITDAF effect. Is this not a likely outcome given all of the proposed production increases? I guess that's one scenario. We work very, very hard on forecasting both demand and supply. We put an enormous amount of resource into it. And when we are looking at the various projects that we bring online critical to that is the price that we believe that we can get that energy away out and biggest determinant of that is the supply-demand balance. So we think we're in reasonably good shape there. But it is an industry that, I guess, from time to time, might see a little bit of overbuild, a little bit of overbuild will send price signals to the market that will slow that build down. But what -- but most of our energy contracts are very long term. So they tend not to sort of sway around sort of intramonth like the spot market. Stew, do you want to you want to add?

You can cover it well, Scott. The other thing I'd say is that the Board do keep management very on top of us in terms of making sure that when we put forward projects we are putting forward projects in a way that carefully shows different scenarios for price rises in the future and make sure that we're allocating capital very efficiently. We make -- so my job and our job as executive is to put forward these projects that are ready to go. And then we put forward scenarios in terms of what the price is going to be, and then that's when we make the decision. The other really key thing is that when we put forward projects and the role that Tim Thompson talked about in terms of his team is to look at what the offtake agreement is -- and so for example, the Color Downs wind farm, which cartons 2 wind farm, which is currently in construction and Southland, that project went ahead because we've entered into a 20-year PPA or a power purchase agreement with TY Point, which largely matches the 2. So we enter into a 20-year agreement, which gives us more confidence over the revenue. And then that gives us the confidence to build and invest that capital into a new wound fund.

Thanks, Stewart. So we've got a question from Mrs. [ Bailey ] and she's shocked, actually. She's shocked to find out that she could no longer download her half hour electricity data to a spreadsheet that she obviously uses and she is expressing that, that's not a good thing and she would like that change reversed. So she has access to that data. Now I don't -- is that something we can answer here?

So we were paying an American company, quite a large summer money for a product that wasn't really for future. So our team have built their own. And the first iteration to that was one of the features that we didn't put live, but we have a road map. So we're going to continue to develop that products so we'll deliver better services to our customers through time. So watch that space will drop or not separately to this. .

Yes. There'll be an e-mail from Mrs. Bailey in the system there somewhere. So if you could give and touch and give a bit of a bit of an idea of when that might be coming down the pipe. Right. Have we got anything more online?

One further question online, Scott.

Okay. So the investment pipeline, this is from [ Oliver and Hildegard Croman ]. The investment pipeline showed solar generation and battery storage development from 2028. Please provide some more information on what locations are being considered and what capacity these projects might be. I will answer that. Well, we have we have projects being built at the moment and in our potential pipeline from the top of the North Island right to the bottom of the south, we have quite a diverse lineup of prospective projects. One of the things that we need to do is we're assessing whether we're going to invest your capital in those projects is to assess which are the most attractive and prioritize which ones we're going to bring to market and win. So I say that as an overarching comment. But Stew, do you want to add anything to that?

Yes. So solar grid scale, solar keeps growing in New Zealand. There's 2 ways for Mercury to I guess, interact and be a part of that growth in terms of grid solar. One is for us to build solar farms ourselves and that's certainly something we're considering. Typically, those projects will be in the areas which have the greatest sun. Typically, that will make them in the North Island or in an area which was pretty warm. So they're definitely on our list. At the moment, we believe that our wind farms have a much more beneficial and a much more positive business case to be building in some of those solar wind farms. So that's why we are on that chart that was shown before actually put into onshore wind and geothermal because we believe that is better more beneficial for our shareholders than solar at the moment. But the other area which we can actually help New Zealand and grid-scale Scholar is through contracting. So we don't necessarily have to build the solar farm ourselves. We can go to a developer and a developer can build the solar farm and we can provide them a fixed price for taking the power from their solar farm, which gives them the confidence to build that solar farm. So Tim and our team are also working very closely with a number of independent solar farm developers to look at putting in place these contracts called PPA or power purchase agreements that then enabled them to build solar farms of that size.

So Paul, is there anything else online?

No further questions online, Scott.

Okay. So we're getting to the end. I'll just cast my across, is there anything else from the floor that you don't think we've covered? Okay. So it appears to be that there's no further questions or matters for discussion. Thank you all for your engagement and your attention. That brings us to the end of Mercury's 2025 Annual Shareholders Meeting. For those of you who are here in person, we hope that you will stay fatigue coffee and biscuits. Before I cross the mic, I just want to make the comment that James Miller, who was there, but has disappeared, reminded us yesterday just was an important industry that we're involved in. This company is a New Zealand champion it is a critical facilitator of economic growth in New Zealand through the investments that we are making in our generation capacity. And it's a company, I believe you can all be very proud to be involved in.

Scott. Look, I've just been asked to close our meeting today with a quick [indiscernible]. But before I do, I just want to take this opportunity to personally thank you, the owners for supporting me over the last 10 years I walk out of the door here today for the last time, feeling incredibly proud of being part of this business, this organization. I truly believe that it's one of the most important businesses in this economy. We have a big role to do to make sure that we can support our industries and our households to prosper. And I think Mercury has got a key role to play in it. And I can tell you now because I'm unconflicted and I'll be sitting in those seats looking back here next time is that the corporate DNA from inside this business is so strong and so powerful because its duty of care to people and the natural resources we were relying for our fuel are immense. And that's going to get us through this difficult transition because that compass is holding us steady on a course of uncertainty in the future. So I feel proud I've been part of it. I'm going to feel proud of watching the success into the future, and thank you again for your support over the last 10 years and now into the future. So I'm just going to close with a quick karakia. [Foreign Language] Thank you.